The Moz Blog

The Long, Dark Teatime of Rand's Decisions

Rand's Warning: This post is very long, very personal and, while highly informational, doesn't contain many tips on how to perform SEO or get your content or your site in front of the right people. What it does contain is a bit of history about our business here at SEOmoz and a sharing of the issues we're struggling with for the future.

Why am I writing a post like this?

To be honest, there's two reasons. First, our name, SEOmoz, isn't just short and memorable, it's representative. Even though we're a for-profit enterprise, I've always strived to keep the members of SEOmoz and the readers of this blog informed about everything we do – it's part of our creed to keep this “project”, which has become a successful consulting business, “open source”. My belief is that this philosophy of “moz” - open, sharing, freely available and participatory - is one of our greatest assets and posts like this keep that philosophy a reality by making our business as transparent as can be.

The second reason is selfish – I need your advice. The comments here at SEOmoz are one of the greatest sources of inspiration, feedback and quality advice we've got. I rely on the input given to help navigate the direction of the blog's content and in this instance, the future of our business. I need feedback more than ever.

On to the struggle itself...

Right now, SEOmoz is in a very unique position. We've found ourselves torn between two worlds, navigating uncertain waters without the benefit of long experience. Our central quandary is – what direction do we take? Our options:

A) Continue to serve clients, provide SEO and web marketing consultation and generate relatively robust profits as a firm. We're poised to grow to 8 full-time employees in the next month (from the 3 that we had last October) and from that vantage, we'll be in a position to bring in between $700K and $1.25 million in revenue over the next 12 months. Even with significant overhead and expenses, it makes for a well paid team and a decent budget for growth.

B) Ween ourselves off clients and develop our own content play in the Web 2.0 landscape. As fun as it is to see the traffic, visibility and revenues of our clients launch skyward as we work with them, temptation begs the question... “why not do it for yourself?” Indeed, I can't think of a meeting with a venture capitalist or experienced entrepreneur in which the question hasn't been raised - “If you're so good at this, why serve the interests of others?” I think I know how stock brokers must feel.

Before you ask, the answer is yes – we have an idea and a project ready to pursue to create the next Flickr/Facebook/Writely/Craigslist/What Have You... It's a question of timing, fear and uncertainty.

The safe play is option A – to continue to grow steadily, bringing aboard new and exciting clients, helping them with the familiar ground of optimization, content generation, promotion and marketing. But, I can't delude myself into thinking that the current economic climate of investment, growth and prosperity for Internet companies will last forever. Indeed, having been a solid part of the dot-com crash, it's hard for any entrepreneur to ignore the lessons of the cyclical market.

On the flipside, I have no illusions that despite the innovation of our idea, it won't remain an untouched landscape forever. Indeed, even now, I see potential competitors who must be eyeing the same horizon lustily, dreaming in their showers of ways to become the “Amazon” of the market.

So, why now? Why the sudden crossroads?

The answer is – we've been offered financing, and not just from a single source. Our connections to the worlds of private equity have aroused interest from 3 different groups, none of whom have even heard our idea pitched to them, but all anxious to know whether we have something up our sleeve that's ready to receive seed funding. It seems odd to me that without ever seeing an idea on paper, I've been independently approached by these potential investors, but I see some clear signs that suggest why this is happening:

The blogosphere has made investing in “unknowns” much more difficult. Finding a company that no one else has heard of, particularly in the consumer Internet field, is nearly impossible for investors in the current marketplace, so they're seeking instead to find companies that don't yet exist and ideas that have never been put on paper.

Our profile and experience has garnered attention. It's undeniable that press like that received for the Web 2.0 Awards, the Beginner's Guide to SEO and the blog itself influences those investors who observe the online field. SEO itself is exciting because of the power targeted visitors can deliver. The resurgence of the online advertising model and the power of search engines to drive revenue has investors seeking plays to take advantage of the boom.

Our passion for SEO (and all things online) is infectious and overwhelming. I think people often walk away from meetings with me with the same giddiness that I ooze from every pore when I start talking SEO, linkbait, Web 2.0 and the power of the Internet. I've never been a “salesy” guy – and, in fact, I never try to sell us (SEOmoz), per se. What I sell (without really trying) is the idea of the Internet as a frontier where anything is possible with right tools (those tools being – targeted traffic, passionate users and the possibility of dominating your competition on the web). The people I interact with seem to make the natural leap to opportunity and possibility on their own.

I hate to come off as conceited or full of myself, and in fact, I harbor no delusions. We've come from humble beginnings, not just in the field of SEO, but in the field of business. Many folks don't know that I financed SEOmoz personally through debt, and had months after the crash where, between the three of us (Matt, myself and Gillian), only one person took home a paycheck. Gillian (my mom) spent some dark, dark days managing our finances over the last 5 years – days that affected her marriage to my father, her ability to care for my brother and sister and her spirit. I'm overwhelmed that I can look forward to a day in the next 2-3 months when our entire debtload (from years of losses) will be erased.

I didn't learn SEO overnight, either. My early posts from SEOChat (only 3-4 years ago), show my inexperience and naivety with a field that is immensely complex. As much as SEO comes as second nature and logic to me now, I can certainly empathize with those who aren't versed in the subject. I regularly read 20-30 blogs, browse through dozens of forum threads and watch SERPs across dozens of industries just to stay on top of the game – and I learn something new every single day.

The field of SEO has been a forgiving learning environment and the people of SEO – you – have made this business viable. I owe the success of SEOmoz as much to forum posters, conference speakers (and attendees), social taggers and bloggers as I do to our successes with projects like Avatar and press like Newsweek. To be totally honest, I think that more than anyone else outside the organization, I owe Danny Sullivan a good 20% cut on the business (I'll have to make it up to him in conference tickets). With a bit of luck, I've been able to give back a little, too, through referred business, a little link love and a healthy dose of promotion for the industry as a whole.

Now for the shakedown – a list of positives and negatives, fears and hopes for the future of SEOmoz.

Do it Rand, take the money:

We could develop our idea in 4-6 months, rather than the 18-24 months we'd need to finance and develop it without outside help.

With VC backing, our network of influencers, business consultants, accountants, intellectual property lawyers and experienced enterpreneurs could help to support our effort to grow quickly and minimize competitive risks.

Even if the idea failed, we'd have the security of money we didn't owe to a bank or collection agency should things turn sour.

We could maintain our current business, rejecting only new clients, and still keep a presence in the SEO world should we decide to re-engage the consulting sphere.

External pressure would help to keep us focused and external advice could help us avoid pitfalls in the road.

If we don't take the leap now, it may never become an opportunity again. Someone could enter the space, the market could collapse or worse yet, our lives could change to a profile that could no longer accept the risk inherent in taking this path. At this stage in our lives, we don't have children or spouses to care for, nor elderly family members requiring financial support. It's a rare window in any person's life in which financial security is flexible.

Don't risk it, Rand, you're on the right path:

Could investors look at our idea, fall in love, reject our plan and recruit their own team to build the project, betraying us and stealing our idea? Would we have a legal leg to stand on? Could we hope to win in court against a far better equipped opponent?

What would an ownership stake look like – 10%, 20%, more? What recourse would we have if we wanted to buy back the investment shares in the future to once again have complete ownership? If we get a $500K investment, will it cost us $5mil or $50mil to get that ownership back if things go well?

If we pursue this project with outside financing, will we be able to maintain sovereignty over its integrity, its offerings and its revenue model (which, as we've conceived it, is back-loaded and not especially aggressive)?

Will we have the power to say “no” to a buyout offer should one come along down the road? If we want to maintain control of the company, but are forced to provide an “exit strategy” for investors, who will win that struggle?

Will we have the freedom and free time to continue our many forays into experimental projects for the SEOmoz site and the SEO community?

We've only recently become largely independent from outside funds – are we ready to accept the responsibility of investment?

Will our consulting projects suffer from a lack of attention? Will our reputation in the industry? If we can't contribute to the SEO world in the form of conference speakings, online articles, etc. (the very things that got us where we are), have we given up too much?

These are hard questions for me to answer. Despite almost 10 years in the web development and Internet consulting/marketing industry (only 4 in SEO), I recognize that shouldering a decision like this will come as a challenge no matter which path we take. I wear a beard to help hide my age and present a more "commensurate with expectations" profile to clients and business associates but in truth, there's still a 26-year old making decisions for a great number of people – not only those we employ, but the customers we serve, the readers and contributors to the blog, the online and offline professional community and the businesses we help guide.

If ever there was a time to make the right decision, it's now. So, whether you've got a direct position on the issue or just some helpful advice to offer, it would be greatly appreciated. Thanks for reading all the way through this Monday night rant. Back to our regularly scheduled programming tomorrow – I promise.

35 Comments

Having been part of the dot crash, and experiencing the thrill of the high and crush of defeat - twice - I have only this to share...
Stick with what you know how to do best, that made you a name, brand and brought the first customers. As soon as companies start getting greedy, or think they can do (or take on - ie. acquire) more, or "develop something new", all the money and assets go there.
So that the original foundation dies.
Your company is "young". Add divisions to experiment if you want but I'd be more in favor of creating a demand for your product/service, rather than creating a new product/service that has no demand.

Rand, What a super exciting, scary, profound place to be in. DO IT! DO IT! DO IT! DO IT! Do not wait 18-24 months. That is an eternity. You've been doing SEO for 4 years. 2 years is too much of your prime to wait. In Internet years, that’s a very very long time. You can’t think and ponder and second-guess yourself for 2 years. You’re right about your place in time right now. Kids, a mortgage, a sick relative, unknown responsiblities and impediments – you don’t have that now. And finding time for your love, SEO, and the new business – well, you’ll be sleeping a lot less.
The stars and planets have aligned. Through your own doing, a rocket ship has stopped at your door and wants to blast off with you at the helm. Go discover this other planet. I have a feeling that one day, everyone will know your name. You can’t pass this up.
You have 3 VC knocking at your door? Structure it so that you maintain sovereignty, After all, that’s why they want you – they like your style. The business might be so successful that it will be expensive to buy them out. Well, you’ll have a 1-1/2 year lead on the market., and that will be the price you’ll have to pay. Or get a loan now, but don’t wait.
I’ve wondered for years why great SEO’s aren’t selling their own stuff on the web. Grow your consulting business, too. You need to replace yourself, like Ammon did.
Whatever you do, people will follow you and your blog, either because they’re interested in SEO, or fascinated at how the worlds of SEO and business combust into what you’re going to create.
The most exciting person I met at the SES NY conference was a woman who started a cable and wire business 4 years ago from her house. Now she has a huge warehouse, 15 employees, her husband quit his job, and she makes millions of dollars in sales a year.
Well, good luck, and keep us posted. Whatever it is, it sounds very very exciting.
Risa

It depends on how good your idea is imo. Assuming it attracts a large customer base, are you rock solid on how it will generate revenue?
If so, I'd be more inclined to get a loan and back your own play.
Look again at what it will cost and how you would do it if you were using money you owe.
Talk to Danny, tell him your idea - obviously you can trust him. He would be a good sounding board I believe.
If you go with VC, as mentioned just get a great lawyer experienced with VC and they will address your concerns.

Rand,
Let me echo a bunch of people in this thread. Count yourself lucky for having a problem like this!
I personally like the idea of becoming one of the premier SEO consulting firms. You're heading that way, but that is the conservative choice. There might be some major mula by venturing into Web 2.0, but you could lose your shirt -- and underwear, socks, accessories, etc. -- as well.
It's tough. Currently, I have a web 2.0ish idea that I think could make money, but I work full-time and of the last things that I want to do is go home and work on a business plan.
You'll probably win doing either. Personally, I think doing both is a bad idea. You don't want to confuse your "core competencies," and as small as you are, that can happen quicly.

Rand,
Wonderful post. I have a couple suggestions/opinions.
If you focus on building your consulting business, you have the reward of building a company of value for your employees, your customers, and the industry (actually I think you've already done so). If you want to eventually receive the equity of the company via a sale, that is one option. Or you could continue to grow and keep it private, enjoying all the financial and personal benefits that brings, however risking as you said the variables of the marketplace.
If you look to go the web 2.0 route, my suggestion would be to keep it private if you believe you can develop and market the solution within the means you have, and if the window of opportunity is long enough for you to do so. If you believe you do not have the funds available to float the business to grow and market it, or if you believe the window is NOW, then you may want to look at funding, VC, angel or otherwise. It is better to take a % of something than a % of nothing (something I learned via the dotcom crash).
As others have suggested, if you could keep SEOmoz moving foward while continuing to invest in this new biz model then I'd certainly suggest both.
Lunch is always available if you'd like to chat further!
Dana

First bit of advice... Do Work That You Love.
I am struggling with these same sort of questions. Right now I have full time employment as a college professor and I have some nice websites. I love both of these "jobs" - although I would do either of them for sport and no thought of pay.
I am an extreme workaholic and I have been blessed with a need for very little sleep - so I can accomplish more than most people. But, the problem with trying to juggling multiple demands on your time and brain can be very taxing - even if you love both of them. The demands come in from all directions, work gets blurred together, then you are playing "draw and shoot" and you wonder which bed you are sleeping in tonight.
I don't do anything half assed so I attack full force on both fronts. In a previous life I held an appointed position at a busy government agency. There I saw that ten mile an hour people could run twenty miles an hour for a few years but soon it took a toll on them. There is simply a limit on what one person can do... unless you want to make one of your ventures a "hobby" - and what client wants his high paid work to be somebody's "hobby". There is that age old saying about serving two masters and some great wisdom in that saying.
But, on top of this all, there is one more element... and that is professional development - essential in this business. It is the other near full-time job if you want to be "The Wizard".
So, decide what you enjoy doing, how you want to spend your time, how much time you want to spend on work, and let those things be your guide. Design your life and then design your jobs around it. It matters not if it is work for clients or work for yourself. The important thing is if you love what you do - and do that - not something else.
My personal solution is going to be.... hire a few very good people who can competently do specific parts of my website biz. This will allow me to be the "leader" and not be caught in the day to day work. If you read Steven Covey - this means spending most of my time working in Quadrant II. I will not take on clients - because if I do that then I lose control and must perform to their demands. I will be my own client and do as I please, when I please and what I please.
As for the VC question. Hell No! If you go that route then you have to spend a lot of time writing up proposals, writing up reports and schmoozing people who want to tell you how to spend their money. I'll mortgage the farm before I do that.
Bottom line on the VC question... Bet on yourself, Rand. You are too good of a bet to give that away. If you do have to go that route because the project is too big to finance yourself, then drive a hard bargain and don't sell yourself short.

A second-hand word from a friend of mine who is a founding director of a billion-dollar company. In other words, he lives and moves in that big-money world. He was commenting on my own "great idea". Very firm on, "Don't touch VC money if you can help it." His issues were control, growing the company in a way that is only good for a quick profit and then dumping, not caring about anything you may care about. So sure, not all VCs are evil trolls, but....
From my point of view, I'd ask what your fundamental goals are long term. Then, what the best vehicle is to get you there. Next step is to build that vehicle. Other considerations such as personal preference, an exciting opportunity, and so on, become secondary. The primary strategic question is only - what is the best vehicle to deliver what you want?
Michael Linehan

Being in a similar position right now with the only exception that version 2.0 of our "Next Big Idea" is already developed. Running two companies at the same time can tell you from my experience:

Ask yourself what motivates you, what do you like doing most. Managing investor relationships, obsessing with financials to turn profit, cool and exciting legal stuff.... all that awaits you if you bring on investors that may be necessary evil if you are like me :)

On the other hand you are in a labor intensive business that depends on you and your knowledge. Stop working for a little bit and your income will stop. Either find ways to build wealth and save or plan on working forever (I don't know when you actually would like to retire or semi-retire).

Do not try to do both businesses, unless you want to totally ruin the quality of your life. If you are in front of your computer 24x7 that probably does not matter.

Remember the learning curve of a few years when you were just starting in SEO? Expect the same here :(

You mentioned you were not planning on being aggresive in terms of making money with this new idea (at least initially). Well, if you want to take VC money, you are going to have to or the little share of control you have will be lost. BTW if the people you talk to are VCs not Angels they are going to want a lot more than 10%-20%.

Unless you have a profitable business model (maybe small but proven and the one that scales), if you take money you'll loose a lot of control. That may not be a bad thing.

For a while we used profits from it to develop the other business: product like, has potential to scale and does not need me there to bring money once we get it going.

The problem: as soon as I turn away from the first business and focus on the second, the revenue stream stops. So I've made a decision to take additional investment becauce in the long run I want to be independent (not have to work for paycheck or myself, just work for pleasure) and the shortest way seems to be Product like recurring revenue type business not Service type business. I don't mind not having control, dealing with investors, etc. for the promise of independence described above. If you want call me greedy :)

I don’t know if this subject has been put to rest yet based on the date of the posts. If not I would like to lend some insight.

I used to help bring companies public by raising capital, arranging all the filings etc. I also brought my own company public so I feel I can give some first hand experience of what you might expect.

If you love what you do, keep your baby! If you take on outside funding or go public, I would be surprised If you ever have the time to write another post.

Here’s a brief look into what you could expect to be doing 18 hours a day.

You’ve done a fantastic job with SEOmoz, but in terms of “big finance” you’re relatively small. Therefore, your offers will come from sharks who will be drooling over a chance to crush you, your company and make a quick buck. They don’t care about your company, its about money.

Every post you make will now have to be reviewed by Lawyers first. Why? Because if you mention clients, profits or ideas - they could all constitute projections, or anything else a greedy person could use against you, which are synonymous with potential frivolous lawsuits.

You’ll be under constant pressure to develop new products. If they are not released “regular” enough, the complaints will start coming in. If you release them too fast, they are not up to your standards.

It was always my dream to bring a company public and I finally did. It took away everything that made me proud. It wasn’t fun, there was no time to enjoy it and was the worst thing I ever did.

Sure, it is right for some people, but I promise you it isn’t about doing what you love anymore. It will be about putting out fires and pleasing greedy people and regulators.

Let me give you a couple small examples;

In our business plan we had a project slated for October. It was released August, we finished up quicker then anticipated.

A month later the S.E.C. sent me packets that took me months to clear up because they wanted to make sure nothing fishy was going on.

(bring on the lawyers and accountants to fix the problem)

I bought a pack of Cigarettes and water at a 7-11 once. I didn’t have any cash on me so I used a company credit card ($5.50). Well, I potentially just pierced our corporate vale and it cost me $7,000.00 in accounting fees to rectify and countless hours adjusting books.

Conversations, friendly posts, seminars are no longer just informative bits of information by you. They are words that can be held against you as soon as a shareholder decides he isn’t making enough money.

In short, if you want to go outside, be aware it’s no longer your company and it’s no longer fun. It pays, but its like those movies you see of rich people who have completely miserable lives.

Oddly enough we are in very similar positions. Although we are more of a development shop than SEO, but we have just started offering SEO services.

I was involved with a company right around the bust and some "investors" which were actually cultures came in and took the company apart and sold off all its assets, pink slipped everyone, etc. so I am very wary when it comes to investors.

It does get tiresome though, just making enough to cover salaries and overhead every month. If we were profiting 20-30 percent instead of under 10 it would be a different story.

I have also considered financing the ventures myself, we don't have any "next big thing" planned but we do have some proven profit centers and we are working on developing them in house - the issue is the same, should it take 18 months or 6 months.

Its amazing how similar our stories are actually, my wife and I started our company with our credit cards and no money in 1995, just starting making a decent living in 99, then 9/11 and broke again. Rebuilt the company and finally by 03 we were making money again, from the two of us to 12 full-time employees.

I wish you the best of luck - feel free to contact me if you want a second set of eyes on a decision.

If you can find a few objective people you trust, it's good to run the idea by them. They might point out things you miss. Also consider the size of the potential success. If you're the "Amazon" of the market, but the market is tiny, that doesn't do much good. In general, tackling a hard/difficult problem that frustrates a lot of people has the biggest payoff potential.
I believe funding comes more easily if you don't need it. You're in a nice position where money accrues up to you and your current business is profitable, so play that strength if you do seek funding.
Can't you find some dinosaur company to buy you out for mucho moolah? That might be another option.
Best wishes,
Matt

Thanks for the advice, Matt. I'd be very wary to lose the SEOmoz brand or have it diluted - I think that's something every passionate entrepreneur can empathize with.
The market I'm thinking of... being the Amazon would be very, very big. :) Any chance you want to change your mind and come to SEW Live in Seattle next Friday?

Rand-
Just stumbled upon this from one of your other postings. One of the downsides of trying to do both aspects of your dilemma, not nearly enough time to read blogs.
That said my advice, assuming you haven't already moved forward, is to pursue both. Your free time is negligible but if you believe in your idea you have to pursue it or you will regret it forever. I'm currently running both my SEO consulting business and epiTUNES, my labor of love and "big Web 2.0 concept."
Given your concerns over control I would suggest that you try to finance the Web 2.0 site from your consulting profits until you launch a beta site. Going to Angels and VCs with a demo site that is self funded shows your dedication, which will help you keep far more control. We are currently speaking with both regarding the funding we need and b/c it is more than just a concept our position is much better than when started exploring it as a concept six months ago.
When you are building on their money they have the right and the duty to control the project no matter how much they may like you or believe in you. Building the framework yourself gives you the ability to shop for the right partner. Basically instead of being dictated to you can go to them and say this is my vision; if you get it then you don't want to miss out on the potential profits.
In the meantime your team can still work on client projects. You will have to either sacrifice some new projects or hire outside talent to build your Web 2.0 site but those are the tradeoffs you have to accept in order to make both companies work.
I saw that you're speaking at SES in San Jose. I'm debating attending. Let me know if you'd like to talk in person. It may push me over the edge for attending. If not we can always phone. Best of luck either way.
Toren

I also vote 'do both'. There shouldn't be any reason why you can't do both, even if that means hiring someone to manage one of the businesses.
Either way I think you should go for it. You only live once and don't want to regret not going for it. Even if you fail I think it's better to chase your dreams. If you don't, you'll always wonder what could've been.
I'd recommend that you don't take VC money yet. Now I don't know specifically what your big idea is but generally speaking web apps are pretty inexpensive to build these days.
The sooner you take on VC money the more equity in the company you're forced to give up. The last thing you want to do is only end up with 10% of your company. Invest a little of your own money and get the thing of the ground. Prove that your company is on the right track and your valuation will be higher, then you won't have to give up as much equity in YOUR company.

Rand,
Which ever decision you make, it's very important that you feel comfortable and confident with that decision, and that you feel that it's a direction in which you really want to take your life. That's not to say you shouldn't take risks, but you also shouldn't make a decision purely based on the logic of which is potentially better than the other.
It is my suggestion that if you and your team are comfortable witht he risk and excited about this future prospect, then I feel you should pursue it, and while I don't know anything about your current workload, etc, I also feel it's plausible for you to continue consulting and pursue this project. If you no longer accepted new clients and perhaps increased your team by a few members it seems plausible to manage both projects concurrently. However, it's important that if you do pursue both then you must be completely committed to both, because if you just go half assed then it will show in the result, and that's not good for anybody. If the project then works out, you'd be able to phase out consulting and concentrate wholly on your other project, and if it doesn't you could again continue to accept new clients.
As to the actual funding, there is, as you mentioned, the risk of losing control of the project, etc., but these depend specifically on the organization(s) you're working with; this is something you could likely negotiate before any deal was made. The best situation may be to go with multiple funding organizations for less money each, thus you're still selling the same share for the same amount of money, but that share is distributed amongst several, thus each would have reduced power.
I would say that if you personally are feeling comfortable with the prospect of the new project, then you should discuss it with them to see how they feel. If the general feeling is you should pursue it then you can begin talking with VC's or angel investors or whoever and see if you can create a deal which is fair to both parties. If not, you can walk away with just a bit of time lost (potentially they could steal your idea, but with a bit of luck you could get them into an NDA). If you can come to a fair deal then go for it 100% and enjoy yourself along the way..

There are worse positions to be in Rand :)
Without knowing the complete detailsof what you have in mind, I'd recommend you not take the funding if it's something you can develop on your own. If it's a matter of bodies, then throw some money at a few developers to speed the process along.
Having people who believe in your yet announced project is flattering but if the idea is that good it will soar on it's own. Money might shorten the timeline and you'll certainly need some pocket change to get the word out, but in the end, the good apps bask in the sun on their own.
I'd like to see you guys get some money, but I'd like to see if come to you directly and not to fund the development.
Good luck with your decision.

My thought -- is stop and breath first. You have a great dilemma -- success or success?
How scary is that. The question is what do you really want. I had to make that decision recently. I had some offers that looked great on paper, but when I really thought about it -- it just wasn't what I wanted.
So the big question really is -- what do you want to be when you grow up?

I was going to advise more or less the same as Dave (earlpearl) just did but with one major addition. Consider the possibility of ring fencing your existing operations and developing your own content play with VC capital as a distinct and separate entity.
- Michael

Several things Rand:
1. Congratulations. That is a good problem.
2. Continue to write down all the pros and cons and add them up as you adjust them. Let this be a guide.
3. Hire an experienced attorney within the vc financing field to assist you with some of these questions. Their experience is well worth the money.
4. VC money is very controlling. VC's want BIG payouts. Most don't work. They require serious levels of oversight.
5. Spend lots of time pre planning for operational progress. Human resources would be divided with 2 different directions. That also means a lot of oversight into managing multiple directions. It is a big requirement
6. Negotiate the cr@p w/ the vc's. With multiple sources offering potential funding you have a lot of room to negotiate terms that are more favorable to you.
7. Being solicited by vc's reminds me of being a tenant within a soft office market with lots of choices. As the tenant (potential recipient of vc money) you have the initial leverage. Many want you.
Negotiate negotiate negotiate several deals at once.
Once a business agreement is tied down...and moving into a formal contract...leverage turns to the vc(s) with whom you choose to do the deal. They have multiple experiences. They will generate the contract form. At that time leverage turns in their favor and you and your attorney are working to scrutinize the terms and maintain as much protection as possible.
If their are complex formulai within the contracts, don't rely on your reading of them. Do all the calculations. That stuff can be very tricky and/or deceiving.
Weigh everything you articulated before and/or while you are going through the process.
One of the best sources of advice are people who took money from vc's. Question as many as possible.
A second great source of information and assistance would be a vc or former vc from whom you are not potentially getting money.
Good luck.
Dave

Let me start by saying that I am not qualified to give advice on "big business" matters. However, I am qualified to give opinions, so that's what I'll do. I would personally not take the VC money, simply because I wouldn't want to be indebted to someone once again. Instead, I would treat my new project idea as just another client, and put the same amount of time, energy, and resources into making it successful as I would for a client. Granted, this client is you, so you aren't gettnig paid to do the work. But you say you're poised to grow to 8 employees. Why not grow to 6 or 7 instead, and use the money you would have used for the other 1 or 2 employees, as "fees" paid to launch this new project. In other words, instead of growing quite so much, use some of the projected expeditures to finance the project.
I definitely, positively, think that you should launch the project, one way or the other. Spread those eggs into other baskets. It is vital, in my opinion. But whether or not you use others' money is the big question. I think you have it in you to do it yourself, without getting yourself locked into someone else's wants/needs/desires/whims.
But those are only my opinions. I'd suggest seeking some legal counsel for some "real" advice.
Either way, good luck, Rand.

Do Both
I know the decision is difficult but this is what is supposed to happen. Let me give you an example.
Many of you are familiar with the product Akismet. Akismet is a REST based system that is attached to the popular WordPress blog that pulls in data based on every comment and trackback, runs it through a central database, and returns to the client Wordpress whether or not the comment or trackback is likely spam. The idea is fantastic, it allows the aggregate of comment and trackback spam across the web to be compared against that single spam post being put up on your blog. It is an idea I had at the same time as the founders of Akismet.
Most of you don't know of Linksleeve, and probably never will. The site, the service, is completely free and uses the XML-RPC standard to accomplish the same thing. The system is easy to integrate into every blog, forum, guestbook, or wiki ever made. But, it came out within a week of Akismet.
Akismet had tens if not hundreds of thousands of investement dollars from its initial founders, plus an initial base of millions of Wordpress users. In my case, it was a weeks worth of effort and the price of a cheap dedicated server. Today, Akismet has stopped millions of pieces of spam, LinkSleeve has stopped 60,000.
Rand, this is how it is supposed to happen. You are finally in a situation where Your Ideas Get to Win. I'm not there yet, I am still posting ideas to theGoogleCache daily and hoping guys like you pick it up and blog about it. They are damn good ideas, but my sh** wouldn't fly in front of a VC. You have good ideas, and now the reputation to attract investment.
It would be a shame if you gave up on that dream. But it would be an equal shame if you thought you had to give up one to take another. The guys at Wordpress and Akismet never gave up on both, even though both are ambitious and time-consuming.
I don't think you want to trade your past for your future, and chances are, you don't have to. Find a way to do both. You must.

You can benefit from both options, and don't need the VC money to make it happen.
1. The consulting practice is growing and will likely continue to grow; you can see this are your core business and likely as your stable income.
2. The 2.0 biz may require a lot of time to get off the ground and may require a ton of money, if implemented...but you won't need to go that far.
Thus, my opinion for you is to continue consulting while starting up the 2.0 biz -- do whatever you can to get it past the proof-of-concept phase and into a pseudo implementation. I have no doubt that once you can grow it to the point that it requires more than 2 dedicated servers that you will be able to sell this piece of the business off to a more grounded Internet / media firm. Why sell? Because 2.0 smells too much like a bubble Rand; I've seen it too many times now to ignore it. As VC money starts to be thrown around again, medium sized companies are going to start getting antsy, and if they can grow their user base by paying top dollar on your 2.0 property, you'll be able to take the cash and reinvest it back into your core business.
I'm very proud of how far you've come since the early days of SEOchat; these are the problems we all wished we had back in the day, and now are getting to deal with.
Cygnus

By the way Rand. Many metropolitan regions have "angel groups" (an organization of vc's.) The groups often sit in front of multiple requests for funding.
The funding requests should be simple and quick. You need a business plan for further study.
Getting in front of those groups could give you more exposure, more experience, and more choices.
Dave

Rand,
I don't think I can give you good advice. I have never been staring down the barrel of VC funding, and I have never operated a successful consulting firm.
First of all, wow you are young.
Second, Good for you.
Third, do what you love.
Fourth, never regret a decision like this.
It is pretty cool what you have been able to build here on this blog. A group of people, most of whom may have never even met you, who are all rooting for you and hope you are successful in whatever you decide to do. That should give you lots of confidence.
Best of luck.
Oh and great usage of a Douglas Adams book.

Rand,
As an avid daily reader of your Blog for quite some time, I'm quick to recommend it to others interested in SEO and business on the Internet in general.
You’re one of those in this industry that provide high quality services and real value to your clients, and ultimately, help to give it a good name.
I recently left my full-time job as an Information Architect to pursue my own entrepreneurial interests - partly due to individuals like you. I strongly believe in going above and beyond to deliver both education and services to all my clients.
That said, I think it would be a great loss to us and all your potential clients should you decide to pursue your million dollar idea and remove yourself from providing consulting services.
On the other hand, it's these opportunities that have the potential to change the way business is conducted on the Internet and to create great wealth. Many of today's billion dollar companies were spawned in moments like this.
In any event, I'm positive you'll be highly successful regardless of the direction chosen. I know you have the support of many. Thanks for being a voice for the rest of us...

Hey Rand,
1) Quality of life... I've had this conversation a few zillion times and it boils down to... quality of life. Your consultancy is successful by all definitions, so what would the new project gain you you dont have? More money, fame, intergalactic superiority? What would drive you, and where does that come from? Do you have the personality type to keep that in check? There will be a TON of pressure the moment you accept a single investment dollar. NOTHING is worth risking your quality of life.
2) You brought up some issues on taking your idea and running with it. My last blog post titled "I could tell you, but then I'd have to kill you..." addresses this fear as rational or irrational. http://masterplanz.com/blog/?p=13
Call me if you want to talk further as I owe you some time.

I'm a newbie on this subject and your site has rewarded me with a wealth of actually useful information.
So, Thank you!
Aquasparkle's right, you bask in the sun based on merit seen by others, period. It doesn't matter how much money you have (think boo.com). Read some Seth Godin (Free Prize inside is my favorite). He's done the research to prove this belief on many occasions.
Don't become a predator's next prey. You've already created a massive amount of support for who you are now. It may not be the form that get's you the home in the Hamptons, at the moment. But, our enthusiasm costs nothing so you'll be running a 100% profit off of every dollar we influence. Channel that before you hook yourself up in a parasitic relationship.
Again, thank you for your site.

Do both, Rand. If you have been offered financing, there is no reason why you cannot continue to grow the consulting business and use the financing to take on the Web 2.0 challenge. You'll need to designate someone to handle one side of the business at one point, but you may find the challenge of launching into dual directions very rewarding.

Rand,
Interesting post. I think there are two aspects to think about, and here are my 2c for each:
1. IMHO, the SEO industry is evolving to be very similar to the management consulting (MC) industry - we already think of it as a consulting business. As such, we can look at what McKinsey, BCG, Monitor, and the rest do, and draw some similarities.
For one, in MC, most people go into a firm and stay there for 2-3 years. Very few actually stay on to reach the top, which takes around 10-15 years. What do these leavers do? They take up management positions at non-consulting companies, usually.
The important element here is the large, prestigious, firms. One option for you would be to move SEOmoz in that direction: become the best of the best of SEO consulting firms. Accept the best people, train them while they are working for you (i.e., you make money), and send them out into the real world. There is nothing wrong with occupying the top of the mountain ;)
2. You have the entrepreneurial spirit - you described it very nicely in this post. The fact you're thinking about doing it again (albeit with less personal financial risk) shows you still have it. There is nothing stopping you from doing it, and become one of those "serial entrepreneurs" we hear about.
The choice, I think, boils down to how much you love SEOmoz the company. To start another company, you cannot expect to dedicate any time to SEOmoz. I think to properly launch a new company precludes you doing other things.
You talked in the plural, as in the team would join on this new project. If so, SEOmoz as you - and we! - know it, will no longer be with us. Can you leave SEOmoz?
Just as a final note: are you sure the options are exclusive? Can you hire more people and do both things? That might work...